Empirics
Unstable economy
One of the most serious problem modern economies experience is instability in overall economic activity. More specifically, in some periods economic activity is very low which causes high unemployment, and in some periods economic activity is very high, which causes inflation (because the demand is higher than the supply). The graph below illustrates this instability in practice. In all three countries unemployment rate has changed considerably from 1983 to 2011. In the UK and the US the rate has been especially unstable ranging from 4% to 11%. Can the government do something about it? As was discussed in the previous page, it does.
Figure 3. Unemployment rate in the UK, the US and Japan in 1283-2011
Source: Eurostat, 2012b